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Food for Thought2017 E-Commerce Trends Impacting Online Grocery Sales
September 21, 2017
Housekeeping
• Today’s presentation will last 45-50 minutes, plus time at the end for questions.
• Have a question? Type it into the Chat With the Presenters box located on the left side of your ReadyTalk panel and hit SEND.
• The recording and slides will be available after the webinar.
Copyright 2017 ChannelAdvisor | Confidential
Subscribe to the ChannelAdvisor Blog
www.channeladvisor.com/blog
Copyright 2017 ChannelAdvisor | Confidential
Today’s Speakers
Copyright 2017 ChannelAdvisor | Confidential
Mike ShapakerVP of Product Management
ChannelAdvisor
MODERATORJonathan Laverentz
Product Marketing ManagerChannelAdvisor
Agenda
Copyright 2017 ChannelAdvisor | Confidential
Major trends driving e-commerce and their impact on online grocery retailing
Threats and opportunities facing established players
Ideas for surviving and thriving
Q&A
Today we’re talking about
Global E-Commerce Expertise
Copyright 2017 ChannelAdvisor | Confidential 6
OUR MISSIONTo connect and
optimizethe world’s commerce
Introduction E -C ommerce and G rocery
C opyright 2017 C hannelAdvisor | C onfidential
US Grocery/CPG E-Commerce
Source: eMarketer, Nielsen
0% 5% 10% 15% 20% 25% 30%
Bakery
Beer and wine
Frozen foods
Meat
Dairy
Packaged groceries
Household care
Personal care
Healthcare
Pet care
Beauty
Share of Sales via E-Commerce by Category
$771B-0.1%
$74B+32%
E-Commerce
% Respondents Indicating Online Food Purchase in Past Year
Sources: E-commerce in Europe 2016, Postnord, CNBC/Cowen & Co. (US)Copyright 2017 ChannelAdvisor | Confidential
Global Grocery E-Commerce Market Share
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
Source: Kantar WorldpanelCopyright 2017 ChannelAdvisor | Confidential
TrendsAmazon
C opyright 2017 C hannelAdvisor | C onfidential
Amazon Revenue
Copyright 2017 ChannelAdvisor | Confidential
$88,988
$107,006
$135,987
$-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
2014 2015 2016
Amazon Revenue ($M)
Source: Amazon
Amazon’s Stated Mission
“Our vision is to be Earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.”
Key Tenets:• Value• Selection• Convenience
Copyright 2017 ChannelAdvisor | Confidential
First Party vs. Third Party
Copyright 2017 ChannelAdvisor | Confidential
GM
V/SK
U
1P Dropship 3P
3P – Long Tail of SelectionSeller sets price.
1P – FMCG, CPG, etc. High velocity.Amazon sets price.
Dropship – bulky, moderate velocityAmazon sets price.
13 million SKUs 350 million SKUsSource: 360pi
55% of Product Searches Begin on Amazon
44%
34%
21%
55%
28%
16%
0%
10%
20%
30%
40%
50%
60%
Amazon Search Engines Retailers
2015 to 2016 % of Searches
2015 2016
Source: BloomReachCopyright 2017 ChannelAdvisor | Confidential
Amazon Growth Rates by Category
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
other
toys and games
tools and home improvement
shoes
health and beauty
food
apparel and accessories
home and kitchen
electronics and accessories
Source: Slice IntelligenceCopyright 2017 ChannelAdvisor | Confidential
0%
20%
40%
60%
80%
100%
US UK DE
Estimated Amazon E-Commerce Market Share
Copyright 2017 ChannelAdvisor | Confidential
Source: Fung Global Retail Tech, EuroMonitor, Fortune eMarketer, Slice Intelligence, ChannelAdvisor estimates
34%
43%
16%
26% 29%
41%
TrendsC hanges in offline retail
C opyright 2017 C hannelAdvisor | C onfidential
There is Turmoil in Retail
0
5
10
15
20
25
30
35
40
45
2010 2011 2012 2013 2014 2015 2016 2017
Announced US Retail Bankruptcies
Sources: S&P Global Market Intelligence; Fung Global Retail & Tech
ThroughJun 12
0
10
20
30
40
50
60
2010 2011 2012 2013 2014 2015 2016 2017
UK Retail Company Failures
ThroughMid-July
Copyright 2017 ChannelAdvisor | Confidential
But…There is Still Retail Expansion
Source: Fung Global Retail & Tech
Year-to-Date Major Store Opening Announcements
As of June 23, 2017
Aldi will complete a 400 store expansion by the end of 2018. WM Target of 59 stores includes new, expanded and relocated stores. Target is opening only small-format stores. Macy’s Backstage stores will be opened within existing full-line Macy’s stores.
And Too Much Grocery Space in the US?
Source: WSJ
Grocery Discounters Have Expanded Globally
Source: Planet Retail, BCG
0%
10%
20%
30%
40%
50%
60%
Turkey Germany Poland Denmark Austria Ireland Netherlands Switzerland Portugal UK Belgium France US Australia
Grocery Discounters' Market Share
2000 2015
Copyright 2017 ChannelAdvisor | Confidential
An Example from the UK
Source: Kantar Worldpanel
27.8%
16.0% 15.1%
10.6%
6.9% 6.1% 5.2% 5.0%2.2% 1.3%
3.8%
0.0%
5.0%
10.0%
15.0%
20.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Tesco Sainsbury's Asda Morrisons Aldi Co-op Waitrose Lidl Iceland Ocado Other
Y/Y
Grow
th
Mar
ket S
hare
UK Grocery Market Share %, June 2017
Share Y/Y Growth
Copyright 2017 ChannelAdvisor | Confidential
Retail Outlets Redefined
Copyright 2017 ChannelAdvisor | Confidential Source: Wall Street Journal
Pure Play Online Moving Offline
Copyright 2017 ChannelAdvisor | Confidential
…the ability to pick up…purchases straight away without having to wait for them to be delivered, combined with low, online-world prices has long-term appeal: "It's like the future of retail.” 28-year old Amazon Books customer
Source: BBC
Amazon and Whole Foods
Copyright 2017 ChannelAdvisor | Confidential
Public Grocers
- $40 billion
Amazon+ $14 billion
Source: CNBC
TrendsDevices , Apps , and Digital
C opyright 2017 C hannelAdvisor | C onfidential
The Consumer is Mobile First
2016• 1.46 billion smartphones
shipped; 260 million PCs shipped
• 2 billion people worldwide have a smartphone
• ChannelAdvisor data over Cyber-Five US: 72% of traffic and 46% of
orders EMEA: 72% of traffic and 64%
of orders
Sources: eMarketer, Wall Street Journal, IDC, ChannelAdvisorCopyright 2017 ChannelAdvisor | Confidential
Mobile Usage Dominated by Handful of Apps
Source: KPBC Internet Trends 2016
Average # Apps Installed
on Device
Average # Apps Used
Daily
Average # AppsAccounting for
80% of App Usage
Time Spend on Phone (per
Day)
Most Commonly Used Apps
Worldwide 33 12 3 4 hours FacebookWhatsApp
Chrome
USA 37 12 3 5 hours FacebookChromeYouTube
Copyright 2017 ChannelAdvisor | Confidential
In E-Commerce, Marketplaces are Winners on Mobile
Source: comScoreCopyright 2017 ChannelAdvisor | Confidential
Top Shopping Apps1. eBay Classified2. Amazon
Top Shopping Apps1. eBay 2. Amazon
Smart Speakers Enabling ‘Voice Commerce’
Copyright 2017 ChannelAdvisor | Confidential
Consumption of Media is Changing
Sources: Fung Global Retail & Tech, Ofcom Communications Market Report 2016
Proportion of Time Attributed to Activities, by Age (UK)
Copyright 2017 ChannelAdvisor | Confidential
Social Consumes a Large Percentage of Screen Time
• ¾ of Facebook users and ½ of Instagram users use each site daily
• In China, messaging is used for “everything”
Source: Pew Research, Statista, SmartInsightsCopyright 2017 ChannelAdvisor | Confidential
Millennials Trust in Advertising by Format
Copyright 2017 ChannelAdvisor | ConfidentialSource: Nielsen, Fung Global Retail Tech
Connecting with Consumers
Copyright 2017 ChannelAdvisor | Confidential
% of consumers that trust online reviews as much as personal recommendations
84%
Smaller brands using social to connect with customers and build audience
• # Reviews• Authenticity
Source: BrightLocal
TrendsS hopping B ehavior
C opyright 2017 C hannelAdvisor | C onfidential
0%
5%
10%
15%
20%
Compare prices Find productinformation
Find or redeem acoupon
Read customerreviews
% Consumers In-Store Smartphone Use
Online is Influencing Offline Sales
Copyright 2017 ChannelAdvisor | ConfidentialSources: Forrester, Deloitte University Press
0%
10%
20%
30%
40%
50%
60%
2013 2014 2015 2016
% In-Store Sales Influenced by Digital/Mobile
Digital Influence Mobile Influence
Millennials Aren’t Brand Conscious
Copyright 2017 ChannelAdvisor | Confidential
Source: Cadent Consulting Group/ Adage.com
% of No Preference Between Private Label and National Brands
51%
0
5
10
15
20
25
30
Generation Z Millennials Generation X Baby Boomers
% Total Population in US/UK/DE/FR/IT/ES
Millennials Want Clean/Healthy and/or Lower Cost
0
10
20
30
40
50
60
70
80
Expect GMO-Free Food Expect ancient grains Willing to pay more fororganic/sustainable foods
Trust in smaller brands hasgrown
Would buy all food online ifpossible
Millennials Age 50+
Sources: Fung Global Retail & Tech, Maru/Matchbox
0 5 10 15 20 25 30
Baby Boomers
Generation X
Millennials
% US Population That Sees Eating Right as Most Important Behavior to Stay Healthy
0 5 10 15 20 25 30 35 40 45
Baby Boomers
Generation X
Millennials
% UK Population Agreeing that Cheaper Products are Chosen Over Branded Foods
2014
Copyright 2017 ChannelAdvisor | Confidential
TrendsS maller B rands
C opyright 2017 C hannelAdvisor | C onfidential
Smaller Manufacturers Driving Grocery/FMCG Growth
0%
10%
20%
30%
40%
50%
60%
LargeManufacturers
MediumManufacturers
SmallManufacturers
Private Label
Share of Sales Share of Growth
-2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
Small Manufacturers
Medium Manufacturers
Large Manufacturers
Private Label
Clean Conventional
Share of Sales and Share of Growth by Company Size Sales Growth by Type of Product
22%
11%
1%
13%
0%
5%
10%
15%
20%
25%
Small Manufacturers Medium Manufacturers Large Manufacturers Private Label
Growth in Items Sold per Distribution Point (Shelf Space), 2013-2017
Source: Nielsen (Apr 2017)Copyright 2017 ChannelAdvisor | Confidential
It’s Never Been Easier to Introduce a Product
• On-demand manufacturing• Investment Crowdfunding/Accelerators
• E-commerce• Drop-shipping• Social networks Hyper-targeted advertising
plus word of mouth/influence
• More off-line shelf space for proven products
Copyright 2017 ChannelAdvisor | ConfidentialSource: Wall Street Journal
Investment in CPG/FMCG Startups
Copyright 2017 ChannelAdvisor | ConfidentialCopyright 2017 ChannelAdvisor | Confidential
Source: CBInsights
TrendP rivate Label
C opyright 2017 C hannelAdvisor | C onfidential
Retailers Promoting Private Labels
Copyright 2017 ChannelAdvisor | Confidential
CPG Private Label Market Share
Copyright 2017 ChannelAdvisor | ConfidentialSource: William Blair, Nielsen
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
UK France Netherlands Germany Spain Italy US Australia
2015 Private Label Market Share
US Private Label Share by Store Type
Copyright 2017 ChannelAdvisor | Confidential
0%
10%
20%
30%
40%
50%
60%
Total Value Grocery WarehouseClub
ConventionalGrocery
Supercenters Drug Stores Dollar Stores MassMerchandisers
Private Label Market Share by Store Type (US 2017)
Source: Nielsen
Private Label Share in Select Stores
Sources: CNBC.com, Reuters, Cincinnati.com, Forbes
Private label share (est.)
90% 90%
30%
(in goods similar to those carried by Aldi) (excluding fuel and pharmacy)
25%
“Having a private brand from a margin mix point of view has always been important, but it is even more important now.”
Doug McMillon, CEO, Walmart
Amazon.com – Battery Category
Copyright 2017 ChannelAdvisor | Confidential
ADVERTISING
Amazon.com – Household Battery Category Top Sellers
Copyright 2017 ChannelAdvisor | ConfidentialSource: KP Internet Trends, Amazon
Amazon Prime Day – Electronics and Apparel
Copyright 2017 ChannelAdvisor | Confidential
Amazon, 44%
Bose, 3%Sony, 3%Motorola, 3%
Fitbit, 3%Anker, 3%
iClever, 3%
iRobot, 3%
Ninety7 Inc., 3%
Other, 28%
Share of Page One Electronics Deals on Amazon Prime Day
Source: L2
“The Prime Day fashion deals section was almost exclusively Amazon’s private label brands”
Amazon Private Label – CPG
Copyright 2017 ChannelAdvisor | Confidential
Amazon Private Label – FMCG
Copyright 2017 ChannelAdvisor | Confidential
July 2016 July 2017 Sep 2017
Priv
ate
Labe
l Pro
duct
s A
vaila
ble
on A
maz
on.c
om
Source: ChannelAdvisor
TrendLogistics as a B attlefield
C opyright 2017 C hannelAdvisor | C onfidential
Impact of Long Delivery Times Varies by Category
Copyright 2017 ChannelAdvisor | Confidential
70%
23%
5%
2%
Share of consumers choosing different delivery options
Cheapest form of home delivery
Same day
Reliability (time window)
Instant
0% 5% 10% 15% 20% 25% 30%
CosmeticsApparel and accessories
Small electronicsHomeware and small household appliances
Large furniture, white goods, electronicsAutomotive parts
ToysBooks, CDs, DVDs, video games
MedicationsGroceries
Share of respondents who did not purchase an item online due to long delivery times (% of category)
Source: McKinsey & Company, “Parcel delivery The future of last mile”
Click and Collect
Copyright 2017 ChannelAdvisor | ConfidentialSource: Metapack, USDA, eMarketer
68%
51%
32%
51% 48% 49%
38%
0%
10%
20%
30%
40%
50%
60%
70%
80%
UK FR DE ES NL US IT
Stated Preference for Using Click & Collect
0%
10%
20%
30%
40%
50%
60%
70%
80%
% Consumers Used Click & Collect at least Once
Amazon Fulfilment Options
Sources: Morgan Stanley Research, Credit Suisse
Estimated number of global Amazon Prime members
4.6xAmazon Prime members spend
non-Prime members
Copyright 2017 ChannelAdvisor | Confidential
0
20
40
60
80
100
120
2015 2016 2017E
Amazon Fulfilment Facilities
US EMEA UK DE FR IT ES CZ PL SK
Fulfilment Centers 99 36 14 9 4 1 3 2 3 0
Delivery Stations 44 31 26* 2* 3
Sortation Centers 70 3 2 1
Prime Now Hubs 51 4 1 1 2
Pantry/Fresh DCs 18 2 1 1
US EMEA
76.2 28.5
3.2 2.8
13.5 0.5
1.7 <1
3.8 0.3
US EMEA
34 19
5 -
10 -
1 -
5 -
Active Facilities in US and Europe Active SqFt (M) Planned (#)
Sources: Internet Retailer; Amazon, MWPVLCopyright 2017 ChannelAdvisor | Confidential
* Delivery Station/Prime Hub
Amazon Logistics Ambitions
Sources: Amazon, The Wall Street JournalCopyright 2017 ChannelAdvisor | Confidential
Amazon FBA Growth Accelerates
Copyright 2017 ChannelAdvisor | Confidential Sources: Internet Retailer; Amazon
Amazon’s Delivery Experience is the Highest Ranked by Consumers
Copyright 2017 ChannelAdvisor | ConfidentialSource: Metapack
Retailer E-Commerce Website Brand/Manufacturer Website
Amazon Other Marketplace
Excellent Good Fair Bad Terrible
31% 31%
56% 29%
% Excellent
TrendB 2B as E asy as B 2C
C opyright 2017 C hannelAdvisor | C onfidential
B2B customers increasingly expect B2C-like experiences
Copyright 2017 ChannelAdvisor | Confidential Sources: Avanade, Forrester
~50%61%
B2B buyers that report third-party sites and feedback from business partners, industry peers or social channels as more important than conversations with a company’s sales team
B2B buyers that prefer making work-related purchases on the same B2C websites they use for personal purchases
Amazon Business
• Available in US, DE, UK• Free two-day shipping with min order value
(US: $49; DE: €29; UK: £30)
• Amazon and FBA items• Business-specific offers and pricing• Enhanced product content (e.g., CAD
drawings, user guides)
• Live chat with product experts (manufacturer)• Business-specific features
Purchasing system integration, tax exempt purchasing, order approval
Copyright 2017 ChannelAdvisor | ConfidentialSources: Computer Business Review; Amazon; Baird Equity Research
• Products US: “Hundreds of millions”
• Business customers > one million since launch Up ~400,000 in last year
Conclusions and R ecommendations
C opyright 2017 C hannelAdvisor | C onfidential
Ensure the Foundation for E-Commerce is in Place
Copyright 2017 ChannelAdvisor | Confidential
High QualityProduct ImagesProduct Data
Marketing Site/ E-Commerce Site
Advertising
&more
&more
&more
Additional DestinationsRetail Partners / Marketplaces
Brands: Understand Your Customers
Copyright 2017 ChannelAdvisor | Confidential
Mass Market / Low Price Niche / High Value
Ret
aile
rsC
usto
mer
N
ames
Aggr
egat
eC
onsu
mer
Dat
a
Have an Amazon Strategy
Brand /Manuf. Retailer/
BrandHybrid
Consumers
Third-Party (3P)First-Party (1P)Select remaining inventory
Inventory sold directly to Amazon
New EntrantsEstablishedBrands
IncreasingCatalog
Copyright 2017 ChannelAdvisor | Confidential
Borrow Tactics from Smaller Companies
Copyright 2017 ChannelAdvisor | Confidential
Distribution• Amazon FBA• Logistics/fulfilment partners
Promotion to specific audiences• Google• Social
Promotion to mass audiences• Marketplaces• Social (e.g., YouTube)
Evaluate B2B Distribution
Copyright 2017 ChannelAdvisor | Confidential
Comparison Traditional Distributor (UK)
Amazon.co.uk
Result following search for unbranded food item (i.e., don’t include brand in search term)
450+ results; categorynavigation on left had a variety of unrelated categories; no filtering options
70+ results with clean user interface; navigation on left with easy-to-understandcategories; ability to filter by brand, cuisine, grocery specialty, and delivery option
Price at time of comparison £35.39 for 2 x 1kg (cheaper than Amazon by 59p for 2kg)
£17.99 for 1kg
Minimum online order £75 No minimum
Delivery charge Charge for orders less than £100
Free delivery for Prime members or orders greater than £20
Next day delivery Could not guarantee Next day delivery by 1pm for a fee
Source: ChannelAdvisor
Strengthen Value through Collaboration
Copyright 2017 ChannelAdvisor | Confidential
Manage Your Online Retail ‘Shelves’
Copyright 2017 ChannelAdvisor | Confidential
OFFLINE MERCHANDISING ONLINE EQUIVALENT
Aisles and Shelves
Product Packaging
In-Store Demos
TV/Print Ads
Category/Search Pages
Product Content
Rich Content
Reviews, Social Media,Retail Site Digital Ads
Questions?Type them into the Chat With the Presenters box located on the left side of your ReadyTalk panel and hit SEND
Copyright 2017 ChannelAdvisor | Confidential 73
Thanks for Attending!
CONTACT USPhone866-264-8594Emailmarketing@channeladvisor.comNewsletterwww.channeladvisor.com/newsletterBlogwww.channeladvisor.com/blogWebwww.channeladvisor.comTwitter@ChannelAdvisor
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